In the world of governance, you are often an outlier by virtue of what you are not doing, rather than by what you are. This is most certainly the case with proactive shareholder engagement.
There is an expectation from investors for companies to proactively engage, with 81% of respondents to a CGIC investor study stating this is an important process.
The largest institutions, especially passive funds, place the most value on direct engagement and set the highest expectations for this to occur. As we have commented previously on the blog, many have clearly disclosed practices and procedures to enable them to maximize their time and issuers to understand the importance of this in their view.
If you have not started to plan your off-season engagement, now is the time! Investors can struggle with bandwidth issues, so you need to plan ahead to try to get time on their calendar. You may also want to avoid blackout periods, such as around earnings and investors days. The perception that all companies should engage all investors all of the time is neither accurate nor realistic. But what is the right balance and how can you elevate your process to ensure you are meeting internal and external expectations?
Unless you are an outlier with existing governance or compensation concerns, or believe you may have down the road, you need to understand the issues that are motivating to each investor. Detail agenda items that are appealing and relevant to them in order to encourage the investor to take the meeting. A simple response of, “Thanks, but we’re OK right now,” isn’t always the worst thing, but as the exercise is to eliminate doubt, gather vital feedback, and to establish and strengthen relationships, especially with passive funds and larger investors in general, it is best to do everything possible to avoid this response.
The main questions to consider as you plan your strategic outreach and look to maximize your effectiveness are:
- Which investors am I going to reach out to first?
- Just top—10/20?
- Are there investors further down my registry that I should contact, and why?
- What about passive investors?
- Are there special considerations for engaging passive investors?
- What role does IR play here?
- Who are the right people for me to contact?
- Is it just the governance or proxy contact?
- What role does the PM or analyst play?
- What is the real impact of ISS and Glass Lewis?
- Who is on my engagement team?
- What is the role of IR, legal, Corporate Secretary, etc.?
- Do I need representatives from other areas, such as Comp and Benefits, or Sustainability?
- What role do my directors play?
- What is my message?
- Is it just the same as last year? Is that appealing to my investor?
- What are important issues for my investors, have their policies changed?
- What are general “hot topics” right now and how can I approach them?
- What are my specific strengths and challenges as perceived by my investors?
- What role does ESG play in this?
- What is my message on Corporate Responsibility?
- How do I rate relative to investor concerns, my peers and my sector?
- How should I maintain a consistent message in my proxy disclosures?
- Should some of this information be included in other investor communications/materials?
- Internal communications
- How do I communicate my strategy to senior management and the board?
- What expectations should you have for the process and how do I manage these internally?
- Are their additional items to consider, such as activism?
We don’t need to overcomplicate this process, but with proper planning, we can create a refined strategy to ensure that you are achieving your objectives and delivering a strong, consistent and clear message to all investors.
We are here to partner with you to help answer these questions and meet these challenges.